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This paper develops a stress-testing framework in which banks strategically adjust their balance sheets in response to regulatory constraints and market conditions. Applied to Canada’s largest banks, it quantifies the effects of macroprudential policies on lending and identifies systemic vulnerabilities through reverse stress testing.

DeFi lending with proper governance is operationally viable, but it also faces constraints related to capital efficiency, liquidation risk, and systemic fragility within the crypto ecosystem.

We present a simple model to study the risk sensitivity of capital regulation. A banker funds investment with uninsured deposits and costly capital, where capital resolves a moral hazard problem in the banker’s choice of risk.

This paper studies the implications of model uncertainty for wealth distribution in a tractable general equilibrium model with a borrowing constraint and robustness à la Hansen and Sargent (2008). Households confront model uncertainty about the process driving the return of the risky asset, and they choose robust policies.

Using a general equilibrium model with nominal rigidities and financial frictions, we explore whether introducing a central bank digital currency (CBDC) affects the transmission of monetary policy, and how the effects depend on CBDC design features. We also study whether paying interest on central bank liabilities is contractionary or expansionary.

The discrete choice to adopt a financial innovation affects a household’s exposure to inflation and transactions costs. We model this adoption decision as being subject to an unobserved cost.

We propose a functional principal components method that accounts for stratified random sample weighting and time dependence in the observations to understand the evolution of distributions of monthly micro-level consumer prices for the United Kingdom (UK).

This paper looks at the role mortgage brokers play in helping borrowers generate quotes and qualify for credit. We find that, on average, borrowers that engage with a mortgage broker pay lower interest rates. However, in about 15% of cases, borrowers are steered towards longer amortizing mortgages than they would have chosen absent a broker. Since mortgages with longer amortization have higher total interest costs over the entire life of the mortgage, this steering is expensive.

How do import tariffs affect retail prices? We combine daily product-level posted prices from seven major Canadian retailers with product-level tariff exposure to estimate tariff effects. Prices of tariffed goods rose gradually, peaking at 6% after three months, implying pass-through of roughly one quarter of the 25% tariff.

How does the supply of nominal government debt affect the macroeconomy? To answer this question, we propose a portfolio-balance model of the yield curve in which inflation is determined through an interest rate rule.